What kind of corporate compliance issues did Enron endure? How did the company respond and the outcome of it?© BrainMass Inc. brainmass.com June 1, 2020, 6:32 pm ad1c9bdddf
Enron was founded on January 1, 1985 with the merger of Houston Natural Gas (Houston, TX) and InterNorth (Omaha, NE), and became the nation's largest gas pipeline system with a network of more than 34,000 miles. The company was at a compound annual rate of more than 60 percent from 1995 through 2000. The highest and amazing growth came in 2000, which its revenues increased from $40 billion in 1999 to over $100 billion just a year later. At the time it filed for bankruptcy on December 2, 2001, it was considered the seventh largest publicly traded corporation in the United States.
Corporate compliance issues
Enron had created offshore entities, a unit which may be used for planning and avoidance of taxes, raising the profitability of a business. This provided ownership and management with full freedom of currency movement, and full anonymity, which would hide losses that the company was taking. These entities made Enron look more profitable than it actually was, and created a dangerous spiral in which each quarter, corporate officers would have to perform more and more contorted financial wizardry to create the illusion of billions in profits while the company was actually bleeding cash. These obligations were "contingent liabilities related to unconsolidated off-balance sheet special purpose entities SPEs substantial liabilities appeared on the balance sheet as "liabilities from risk management activities." (Grazian).
In fact the executives like Cindy Olson and insiders at Enron knew about the offshore accounts that were hiding losses for the company, however, the investors knew nothing of this. Chief Financial Officer Andrew Fastow led the team which created the off-books companies, and manipulated the deals to provide himself, his family and his friends with hundreds of millions of dollars in guaranteed profits, at the expense ...
This explains the Enron - Corporate compliance issues